Fixing the Rate of Return After Duquesne

By Stephen F. Williams

Abstract

Messrs. Kolbe and Tye perform an important service in their critique of Duquesne Light \u26 Power Co. v. Barasch. Especially valuable is their exploration of the two different types of risk faced by a regulated utility-first, the risk of being unable to recover its investment in a plant, no matter how prudently incurred, and second, the risk of retroactive changes in the regulatory policy. The second risk appears to be far more of a problem. As Kolbe and Tye point out, it engenders a peculiar type of instability. If the risk is reflected in a higher cost of capital, as it should be, regulators may feel bound to exercise the freedom of maneuver for which ratepayers will have paid